I've co-written 7 books on investments and personal finance with Ken Fisher, CEO of Fisher Investments, 5 of which were national bestsellers. I also led the development of the Fisher Investments On series, a collection of educational guides published by Wiley covering the primary investment sectors—from energy to consumer staples to health care—with in-depth analysis on the economic, political, and sentiment forces influencing each.

The Most Hated Bull Market Ever

As of yesterday, the S&P 500 (total return) breached its previous all-time high. Which may make this the most hated bull market of all time.

This bull market (still going) cannot catch a break. Since it began, not with a whimper but with a bang, on March 9, 2009, we’ve been cautioned “it’s different this time.” (Sir John Templeton could not be reached for comment because he was spinning in his grave.)

US stocks and global stocks banged up 72% and 74% 12 months off the bottom—an initial bull surge unmatched since the 1932 bottom. Except all through 2009 and 2010 (and 2011 . . . and 2012 so far) we were warned it was a sucker’s rally. Hindsight is 20/20, but 74% in 12 months is one heck of a sucker’s rally.

Few believed in this bull. A double-dip is coming, we were endlessly told, which would kill the bull. And some people may sincerely believe we are indeed in a double-dip or even a Depression. But then, they’d have to explain why 12 straight quarters of economic growth isn’t, you know, growth, i.e., not a recession. (Or a depression—a term for which there’s no technical definition. But I think it’s safe to say you need a recession to get a depression.)

Then, there are some who posit this is a cyclical bull market in a secular bear. Suppose for a moment secular bear markets exist. What about a bull market that’s over 3 years old and running and up 121% and 99% thus far (US and global, respectively) makes you not want to participate in it, even if you think it’s a short-term deviation? (Short term? Three years! And going!)

But I’m not actually convinced secular bear markets truly exist (a point Ken Fisher and I make in our 2011 book, Markets Never Forget). Typically, when believers talk about previous secular bear markets, they measure using the Dow (a faulty, price-weighted index which makes returns fairly arbitrary and not reflective of economic reality), or they measure the Dow without dividends reinvested (which is really stretching reality). Or they measure using some other index, but, again, fail to reinvest dividends, which I never understand. Why aren’t dividends part of your total return? That’s why it’s called “total return.” Even if you don’t reinvest the dividends (as many investors do) it’s still part of the benefit of owning stocks. It’s not like you get the dividend, take the cash and stuff it down the garbage disposal. “Pooh pooh to you, dividend. You’re not really money.”

Or they call a period with overall flattish or even below-average (but positive) returns a secular bear, which isn’t a bear market at all. Or they use an odd measurement period. For example, folks often say the 2000s were a “secular bear market” because from December 31, 1999, to December 31, 2009, stocks annualized a flattish return.

Except, that decade wasn’t flat. It started with the final stages of a big bull market, then we got the second biggest bear market since the Great Depression, a five-year bull market in which stocks over doubled, the biggest bear market since the Great Depression, and the massive start of a new bull. It wasn’t one long period of sustained losses. (And considering that decade included two big bear markets, it’s pretty remarkable returns were flat. Capital markets are resilient.) Then, if you tack on a year or two in either direction, the flat returns go away. You’d think, to credibly call something a “secular bear market,” you should include full market cycles—trough to trough or peak to peak—not chop up cycles arbitrarily to get the return you want to make your point.

Because if you used full market cycles, there truly is no such thing as a secular bear market—not one I can measure historically. Since the end of the Great Depression, every bull market has reached new highs—and then continued on. And during every bull market, folks disbelieved it. And the disbelievers often feel vindicated, when after 3, 4, 5, 7, however many years of big bull market returns, a new bear market starts. Because, sure, after every bull comes a bear. But after every bear comes another bull, and feeling vindicated may feel nice for a bit, but it’s probably not as nice as profiting from the overall long-term upward sweep of equity returns.

Note: All return data are from Thomson Reuters, S&P 500 total return and MSCI World Index total return with net dividends.

This constitutes the views, opinions and commentary of the author as of August 2012 and should not be regarded as personal investment advice. No assurances are made the author will continue to hold these views, which may change at any time without notice. No assurances are made regarding the accuracy of any forecast made. Past performance is no guarantee of future results. Investing in stock markets involves the risk of loss.

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